Washington Technology Online Infotech

Feb 06, 1997

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Infotech Mergers Will Tip the Scales in '97

Boeing and McDonnell Douglas, Science Applications International Corp. and Bellcore, British Telecommunications and MCI - these infotech merger headlines made for some fat companies in 1996. Look for even more weight gain in 1997 as companies across the spectrum seek that global edge.

Communications businesses are scrambling to pull together that supercarrier offering of local and long distance telephone service, paging, Internet access, faxing and wireless.

Smaller and medium-sized systems integrators are shopping for suitors - as are larger companies such as Hughes, whose traditional aerospace and defense base is drying up. Companies such as BTG and CACI could be looking for buyers or looking for sales.

Don't look for IBM to merge with anyone anytime soon. It's too busy striking electronic commerce deals with content companies across the country in areas from banking to health care.

Along with the marriages will be many less formal alliances. Almost every infotech company will have a partnership with Microsoft next year. (Okay, that one may be a given).

But Washington Technology expects 1997 will be the year for the merging of middle market companies that rake in $200 million to $1 billion in revenue.

So get out those tip sheets and jot down our predictions.

Bell Atlantic will buy Cable & Wireless. The Philadelphia-based Bell must first complete its merger with New York's Nynex. But we hear Bell Atlantic's next goal is to acquire the British C&W. That would give Bell Atlantic an international focus - something it needs to survive.

GTE will merge with a global telecom powerhouse.

AT&T will buy America Online in Dulles, Va. We've said before this would be a great match, but Steve Case's chumminess with Microsoft CEO Bill Gates, who is buddies with the people at MCI, may nix a deal.

WinStar in New York will purchase Internet access provider Digex, Beltsville, Md. Digex wanted the money from an initial public offering, so it has held out on a buyer. WinStar needs more Internet expertise; Digex needs a telecommunications parent.

DynCorp will buy Sysorex's federal division in McLean, Va. Sysorex executives have confirmed that the company is working with an investment banking firm to find a buyer. Analysts say the company's defense contracts make the company a tantalizing buy.

Many expect PSInet to be bought or buy another company. This Herndon, Va., Internet access provider seems pretty picky now in its choices. We think PSInet will turn down many toads until its prince arrives.

Raytheon will nab Hughes Electronics' defense and aerospace businesses. Those units are likely to fetch far less than the $8 billion first estimated when they went on the block.

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